Correlation Between Real Assets and Advantage Portfolio

Can any of the company-specific risk be diversified away by investing in both Real Assets and Advantage Portfolio at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Real Assets and Advantage Portfolio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Real Assets Portfolio and Advantage Portfolio Class, you can compare the effects of market volatilities on Real Assets and Advantage Portfolio and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Real Assets with a short position of Advantage Portfolio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Real Assets and Advantage Portfolio.

Diversification Opportunities for Real Assets and Advantage Portfolio

-0.67

Correlation Coefficient

Real Assets  Advantage Portfolio

Excellent diversification

The 3 months correlation between Real and Advantage is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Real Assets Portfolio and Advantage Portfolio Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advantage Portfolio Class and Real Assets is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Real Assets Portfolio are associated (or correlated) with Advantage Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advantage Portfolio Class has no effect on the direction of Real Assets i.e., Real Assets and Advantage Portfolio go up and down completely randomly.

Pair Corralation between Real Assets and Advantage Portfolio

Assuming the 90 days horizon Real Assets Portfolio is expected to under-perform the Advantage Portfolio. But the mutual fund apears to be less risky and, when comparing its historical volatility, Real Assets Portfolio is 2.57 times less risky than Advantage Portfolio. The mutual fund trades about -0.02 of its potential returns per unit of risk. The Advantage Portfolio Class is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,112  in Advantage Portfolio Class on September 26, 2024 and sell it today you would earn a total of  1,195  from holding Advantage Portfolio Class or generate 107.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Real Assets Portfolio  vs.  Advantage Portfolio Class

Real Assets Portfolio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Real Assets Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Advantage Portfolio Class

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Advantage Portfolio Class are ranked lower than 18 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Advantage Portfolio showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Real Assets and Advantage Portfolio

The main advantage of trading using opposite Real Assets and Advantage Portfolio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Real Assets position performs unexpectedly, Advantage Portfolio can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Advantage Portfolio will offset losses from the drop in Advantage Portfolio's long position.

The idea behind Real Assets Portfolio and Advantage Portfolio Class pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.